www.retailnews.ie|July/August 2013|Retail News|47
46|Retail News|June/August 2013|www.retailnews.ie
Tobacco
Tobacco
Plain Speaking In light of the recent announcement by the Minister for Health James Reilly to introduce plain packaging of tobacco products in Ireland, Derek Mooney, Sales Director for JTI Ireland, gives us his views on illicit trade, branding and the retail industry.
Ireland has one of the highest rates of illegal trade in tobacco products in the EU, much of it being imported in huge container-loads through our ports.
Derek Mooney, Sales Director, JTI Ireland.
IN December 2012, the Australian Government became the first country in the world to introduce plain packaging for tobacco products. May 27 of this year saw the Irish Government, through Health Minister, James Reilly TD, announce its intention to make Ireland only the second country in the world to adopt plain packaging for tobacco products. Retailers and manufacturers of tobacco products argue that the removal of brand identity is a gross distortion of free market practices, damages the retail sector and effectively provides criminal groups with a more open playing field in which to sell illegal products. Minister for Health, James Reilly TD contends that the introduction of plain packaging will “increase the effectiveness of health warnings; reduce false health beliefs about cigarettes; and reduce brand appeal particularly among youth and young adults.” “There is no credible evidence that this proposal will work,” says Derek Mooney, Sales Director of JTI, Ireland’s leading tobacco company. “Plain packaging is not based on, or consistent with, a credible and scientifically rigorous understanding of smoking behaviour. There is no reliable evidence to support the introduction of plain packaging, nor that it will have any health effects or discourage children from purchasing tobacco products. “We believe that, rather than putting people off tobacco products, the intended legislation will in fact lead to a commoditisation of the market, potentially resulting in jobs losses, and ultimately further increase the illicit trade of tobacco products.”
Retail Profits Branded products are footfall generators and provide the retail industry with a large majority of their profits. “The sale of tobacco products account for some 10-30% of retailers’ turnover, with premium brands, such as Silk Cut and Benson & Hedges bringing customers into stores and generating cross-purchasing” explains Derek. “Plain packaging will have a negative effect on the small retail industry. It may lead to the loss of jobs for those involved with the packaging industry, including design agencies and pack manufacturers.” He also points out that margins will be negatively affected. “Should plain packaging legislation be introduced, premium brands will no longer have a home. This will lead to a commoditisation of the market-place and shift purchasing behaviour, whereby smokers will down-trade. This will affect retailer’s bottom line, and jobs will be lost.” Responsibility Minister James Reilly recently called those that sell tobacco “purveyors of death”. These are strange words for people who engage in the legitimate, licensed trade of tobacco products, and bring significant tax revenue into Government coffers in the process. Derek notes that the tobacco industry is working hard with retailers to ensure that young people don’t have access to tobacco products: “The retail trade complies rigidly with tobacco-related legislation. With over 98% compliance, retailers are very aware of the law.” Education initiatives
have helped with this process, he contends: “The Show Me I.D programme (www.showmeid.ie) has created an online system to help train staff members in retail as to how to prevent sales to those under 18 years of age.” He responds angrily to Minister Reilly’s claims that the tobacco industry targets children. “We certainly do not target children and through initiatives like Show Me I.D, we do everything possible to help retailers guard against sales to minors,” he stresses. The same cannot be said of the illicit trade, however. “Black market operatives don’t care about selling to children. Evidence suggests that they even use children to sell the product, and you can pick up whatever you want at half the price of the genuine product.” Illegal Trade Ireland has one of the highest rates of illegal trade in tobacco products in the EU. According to Government figures, some 20% of tobacco sales in Ireland are illegal. Tax on tobacco products has risen steadily over the last number of years, which according to Minister for Finance, Michael Noonan TD, serves to make the state “a particularly attractive market for tobacco smugglers.” According to Derek, the introduc-
tion of plain packaging will drive the illegal trade of tobacco products. “This gangster’s charter provides an opportunity for criminals to import more product and further hamper the efforts of law enforcement in the detection of what is counterfeit from what isn’t,” he argues. “Identical, unbranded packs will only serve the interests of criminal gangs and counterfeiters,” he adds, “as it will make it easier and cheaper for the underworld to manufacture fakes; putting money in the pockets of criminals and taking money out of the tills of shopkeepers across Ireland.” The Australian Situation Derek points out that the effects of the introduction of plain packaging on the Australian market have yet to be seen. “After the first six months, there’s no evidence to suggest that plain packaging has been effective in Australia; in fact, they are seeing more illicit activity since its introduction.” Other countries are following developments in Australia. The UK held a consultation process and decided not to introduce plain packaging until they had further evidence that it would work. New Zealand is waiting on the result of the World Trade Organisation court case on the subject before mak-
ing any moves on the issue. This is a sensible approach, according to Derek “We call on the Minister to invite all relevant stakeholders to submit to the consultation process and ensure a detailed RIA (Regulatory Impact Assessment) on the cost/benefit of plain packaging is completed.” Alternative Options So, what are the alternatives? Derek believes that there are other options to be considered, which would not have such negative consequences. “Why not have administrative sanctions for the purchase or attempted purchase, and the consumption, of tobacco products by minors?” he asks. “The Government should also provide greater resources and manpower for effective, targeted enforcement strategies to deal with the illicit trade.” He also thinks that education is vital. “Programs such as Show Me I.D – Be Age OK, aimed at raising awareness and preventing youth access to tobacco, are also better targeted and have more impact,” he concludes. “Additionally, there should also be a strengthening of targeted public information campaigns to quickly and effectively raise awareness of the negative licensing scheme and the criminalisation of proxy and purchasing by minors.”